Dividend Stocks: Toromont Industries increases its dividend

Toromont Industries had sales to agriculture and construction customers offset weaker demand from its mining clients. The company will go ahead with a dividend increase in April.

TOROMONT INDUSTRIES LTD. (Toronto symbol TIH; www.toromont.com) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.
In the three months ended December 31, 2015, Toromont’s sales rose 1.4%, to $472.0 million from $465.7 million a year earlier. Earnings per share fell 3.4%, to $0.57 from $0.59.

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Toromont saw weaker demand from its mining customers. That offset gains in agriculture and construction. The company had to cut its prices to compete, and that hurt its profit margins and earnings.
Toromont’s financial position is strong: it holds cash of $66.7 million, or $0.86 a share, and its $153.8 million of debt represents just 6.7% of its market cap.

Dividend Stocks: Debt just 6.7% of market cap

The company is raising its quarterly dividend by 5.9% with the April 2016 payment. Investors will now receive $0.18 a share instead of $0.17. The stock yields 2.3%. Toromont last raised its dividend in April 2015, by 13.3%, to $0.17 from $0.15. The company has raised its dividend every year for 27 years.
Toromont’s results will move higher when an improved global economy fuels demand from mining customers. Meanwhile, it’s benefiting from steady agriculture, construction and power markets. The stock trades at 16.2 times Toromont’s forecast 2016 earnings of $1.92 a share.
Recommendation in Stock Pickers Digest: BUY
For our report on how to judge a stock’s dividend yield and p/e ratio, read When it comes to high dividend yield, you usually “get what you pay for”.
For our view on how to pick the best dividend stocks for your portfolio, read How to spot the best Canadian dividend stocks.

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